Presentation given in Mexico City on September 23, 2011 at DevHour (similar to a GDC but for Latin America). It represents an overview on the gaming market from recent past, to current, to near future. A few predictions and lots of conversation. I firmly believe that with the right support from outside and the government, Latin American game development can be what Canadian game development is today in 3-5 years.

1. The Bu$iness of Games
September 23, 2011 – Mexico City
Justin Berenbaum
Theseus Games, Inc.

2. Agenda
 A Perfect Storm
◦ The Effects
 Retail by the Numbers
◦ The Retail Model(s)
◦ Where We Were
◦ Where We Are
◦ Where We’re Going
 The Social Market
 Mobile
 Trends
 Conclusion
◦ Take-A-Ways
◦ Fortune-Telling
 Questions
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3. A PERFECT STORM
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4. A Perfect Storm – 2009 to 2011
• U.S. economy in recession spilling over into the
world economy
• Beginning of a steady and long decline in retail
software sales
• Dramatic rise and adoption of iPhone and then
Android (mobile apps)
• Meteoric rise of Facebook
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5. The Effects
• Apple convinced people
content (apps) should be
“free”
• Facebook / Zynga – Virtual
goods through micro-
transactions
• Free to play MMO’s and
Virtual Worlds
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6. The Effects
• Dramatic rise in the adoption
of digital distribution
• The big word “CLOUD”
• Going from Product model to
“Service” model
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7. RETAIL BY THE NUMBERS
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8. Traditional Retail Model
Wholesale
$48.00 Retail Price =
(Gross Revenue to Publisher)
$60.00
Cost of Goods (Includes 1st Party
-$8.00
Royalty)
Variable Sales & Marketing
-$9.00
(Commissions, MDF’s, etc.)
Gross Profit Per Unit $31.00
Licensor Royalties - (if any)
- 20% of Gross
Developer Royalties
Profit
Model seems OK, assuming you can
move most of your units at full MSRP Theseus Games, Inc. 8

9. Used Game Retail Model
Used Price $55.00
Maximum Trade-In Value -$30.00
Revenue to Publisher -$0.00
Gross Profit Per Unit to GameStop $25.00
Good for Consumers – Maybe
Good for Publishers – Doubtful
Good for Developers – Yeah right!
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10. The Rise and Fall of Retail
U.S. Videogame Industry Revenue (in Billions)
Retail Only, Subscriptions and Digital Distribution Excluded
$21.4
$19.7
$18.0 $18.6
$12.5
$10.3 $10.0 $9.9 $10.5
$9.4
$6.3 $6.9 $6.6
$5.1
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Source: NPD?

11. Platform Breakdown
Total U.S. Games Spend (in Billions): 2010
$24.7 (-2% vs 2009)
Social networks: $1.5
Casual game portals: $3.7 (+66% vs ‘09)
(+34% vs ‘09) PC/Mac (download): $2.5
6%
15% (+60% vs ‘09)
10%
MMOs: $2.7 PC/Mac (boxed): $2.1
(+27% vs ‘09) 11% 9% (-19% vs ‘09)
Mobile Devices: $1.6 6%
(+46% vs ‘09)
43%
Consoles: $10.6
(-29% vs ‘09)
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Source: Newzoo, 2010

12. Traditional Platform Trends
Worldwide Hardware
Console 2008 2009 2010 2011–YTD*
4,365,219 4,738,151 5,910,598 5,471,806
12,154,986 8.912,394 8,320,295 5,536,184
5,363,229 5,288,667 7,220,353 6,513,403
14,765,991 15,065,468 10,596,169 5,644,388
7.802,298 5,698,096 5,149,101 4,098,014
Total 44,451,723 39,702,776 37,196,516 27,263,795
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Source: VGChartz – *Through September 18, 2011

13. The Not So Pretty Picture
Worldwide Hardware Market Share
2008 2011
10% 15%
18% 20%
27%
21%
20%
33%
12%
24%
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Source: VGChartz

14. Retail Down but Not Out
Worldwide Game Revenue (in Billions)
$81.0
$76.9
$18.5
$66.5 $20.0
$17.5
$24.6
$27.0
Hardware Games Sales
$29.7
Retail Games Spend
$37.9 Digital Games Revenue
$29.9
$19.3
2010 2013 2016 Theseus Games, Inc.
Source: DFC Intelligence & Gamasutra 14

15. THE SOCIAL MARKET
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16. The Social Epidemic
The Rise of Facebook – December 2009
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Source: http://www.pamorama.net/2011/01/30/65-terrific-social-media-infographics/

17. Global Domination
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Source: http://www.pamorama.net/2011/01/30/65-terrific-social-media-infographics/

18. Unstoppable Force
Audience Growth on Facebook
Position Country July 2011 12-Month Position Country July 2011 12-Month
(millions of users) Growth (millions of users) Growth
ALL 712.4 33.5% 14 Colombia 14.6 30.1%
1 United States 151.4 16.8% 15 Spain 14.4 26.4%
2 Indonesia 38.9 33.3% 16 Malaysia 11.2 34.8%
3 United Kingdom 29.9 11.2% 17 Australia 10.6 60.3%
4 Turkey 29.5 64.2% 18 Thailand 10.4 13.5%
5 India 29.5 23.4% 19 Taiwan 9.9 32.1%
6 Mexico 26.8 51.5% 20 Venezuela 9.1 26.4%
7 Philippines 25.3 42.3% 21 Chile 8.5 18.6%
8 France 22.7 16.6% 22 Egypt 7.9 54.4%
9 Italy 21.2 77.6% 23 Poland 6.4 56.4%
10 Brazil 19.8 16.0% 24 Peru 6.3 59.2%
11 Germany 19.5 48.9% 25 Pakistan 4.8 59.6%
12 Canada 16.6 6.6%
13 Argentina 15.6 33.2%
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Source: http://gold.insidernetwork.com/facebook

19. The Social Games Market
Facebook Social Game Metrics
60M (19%)
Addicted Players
600M Active Social Game Players
Facebook Users 318M (53%)
258M
Extrapolates to: 712MM users, 377MM Social Game Players, 72MM addicted.
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Source: Lightspeed Research – September 13, 2010

20. Behind the Numbers
Social Game User Characteristics
Have up to 10 friends
55% playing the same social
games as them
12% Play on a mobile device
Have invited their friends to
59%
join them
Source: Lightspeed Research – September 13, 2010 Theseus Games, Inc. 20

21. A Marketer’s Dream
Social Game Metrics for Marketers
75% 63%
Have a Facebook account
Social games are “more
26%
likely” to buy products from
a brand/company that has
sponsored or advertised in a
social game
Social gamers have
responded to some kind of
39%
marketing activity to get
game rewards
Source: Lightspeed Research – September 13, 2010 Theseus Games, Inc. 21

22. The Local Opportunity
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23. MOBILE
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24. The Mobile Landscape
Smartphone Market Snapshot – Recent Acquirers
Microsoft Palm / Web OS
Windows 2% Symbian OS
Mobile / WP7 1%
7%
RIM BlackBerry
OS
15%
Android OS
50%
Apple iOS
25%
Source: The Nielsen Company, March 2011, Nielsen Mobile Insights, National Theseus Games, Inc. 24

25. Mobile Market Shift
Revenue Generated
U.S. App Store Top 100 Grossing Games
39%
65% % Revenue from
Freemium Games
% Revenue from
Premium Games
61%
35%
January 2011 June 2011
Sources: iTunes App Store, Flurry Analytics, Flurry Analysis Theseus Games, Inc. 25

26. A Deeper Dive
Mobile Freemium Games
Relative Time Spent Playing Relative Money Spent
49%
32%
29% 28%
22%
16% 14%
5% 3% 2%
13-17 18-24 25-34 35-54 55+
Age Group (in years)
Sources: iTunes App Store, Flurry Analytics, Flurry Analysis Theseus Games, Inc. 26

27. TRENDS
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28. The 800 Pound Gorilla
ACQUISITION
Applies to games on any platform. How do you attract customers?
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29. Brand is Everything
The Ecosystem
PC Smartphone
Brand
Console Tablet
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30. Gaming Key Trends
A Rapidly Maturing Market Means
 Customer Acquisition Costs (CAC) - Rising
 Game Development Costs (Including Mobile & Social)– Rising
 “Viral Effect” (K or K-Factor) – Falling
 The 80-20 rule has become 95-5 or more
 Importance of Brand
 Casual Core
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31. CONCLUSION
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32. Take-A-Ways
 Do small things really well / Don’t
reinvent the wheel
 Find Partners
 Be relevant for your target market
 Build a relationship with your customers
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33. Take-A-Ways
Not sure who to attribute this to, but it is very accurate Theseus Games, Inc. 33

34. My Crystal Ball
 Retail finding a way to be relevant
 Android Market Place Economy evolving
 Small innovations will drive big money
 Call of Duty Outsells Battlefield - Brand
Wins
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35. QUESTIONS?
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36. THANK YOU! – MUCHAS
GRACIAS!
Justin Berenbaum
President
Theseus Games, Inc.
theseusgames@gmail.com
Twitter: scslug
All research, trademarks and trade names are ™ and © their respective owners.
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37. APPENDIX
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38. Playing the Game
Social Game Revenue Funnel
Non-Viral User Sources
FB Ads, Offer Walls, Display Viral User Sources
Banners, Cross Promotion, Wall Posts, Streams,
Fan Pages, Others Invites, Email, Others
Refine Marketing /
Create New K
Opportunities ACQUISITION
RETENTION
Revenue Sources
MONETIZATION Virtual Goods, Offers,
Advertising, Merchandise,
etc.
LTV > CAC $ / User
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39. Social Definitions
 Customer Acquisition Cost (CAC): Total dollars spent
acquiring each new customer from all sources.
 Engagement / Customer Retention: How long someone
plays your game and how often they come back.
 Monthly Average Users (MAU’s): The total number of
unique users your game has on a month by month basis.
 Daily Average Users (DAU’s): The total number of unique
users your game has on a day by day basis (these users are
the most likely to spend money on your game).
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40. Social Definitions
 Monetization
◦ ARPU – Average Revenue per User: Total revenue divided by your
total user base.
◦ ARPPU – Average Revenue Per Paying user: Total revenue divided by
the total number of users who paid for anything in your game.
 “Viral Effect” (K or K-Factor): How much is your game
spread by users. A higher K factor can help reduce your
customer acquisition costs.
 Life Time Value (LTV): Total value of a user over the lifetime
of that user. How much money did your customer spend
playing your game before they stopped.
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41. Retail Display of Game Cards
Retail adoption has already occurred. They are seeking ways to
derive revenue from the virtual space.
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